Judge to San Diego credit unions: Court will not force merger

A merger between San Diego County Credit Union and California Coast Credit Union is not expected to move forward, following a judge’s decision issued Thursday afternoon.

San Diego Superior Court Judge Carolyn Caietti has denied a request by California Coast Credit Union to stop San Diego County Credit Union from terminating its proposed merger. SDCCU ended the deal in November, citing alleged compliance issues and concerns about Cal Coast’s disclosures as the merger progressed. In response, California Coast Credit Union had asked the court to issue an injunction, a legal ruling that forces an action, for the merger to push ahead against the objections of SDCCU.

Robert Scheid, a spokesperson for California Coast Credit Union, said Thursday that it was evaluating the decision and staying focused on serving its members.

"California Coast Credit Union is disappointed in the Court's decision on the motion. We respect the Court and remain confident in the merits of our case. As we evaluate the ruling, our top priority continues to be serving our members and maintaining full compliance with all applicable laws and regulations," the credit union said in a statement.

Cal Coast has previously said the credit union has always been in full compliance with the law.

Mike Carlinsky, a managing partner of Quinn Emanuel, who is representing SDCCU, welcomed the decision.

"We are extremely pleased with Judge Caietti's carefully reasoned decision denying the preliminary injunction. It affirms SDCCU's decision to terminate the merger agreement with Cal Coast and we believe signals the end of any merger between the two institutions.

"We hope that the court's decision will persuade Cal Coast to drop its baseless litigation so that the parties can move on with their respective businesses," he wrote in a statement.

The merger would have united two credit unions with $13.5 billion in assets and more than 1,400 employees, creating the fourth-largest credit union in California.

The court’s decision could be described as a contracts law equivalent of two people not being forced to marry after they got engaged and their courtship soured.

“Given the current situation - namely, the termination of the Merger on one hand and Cal Coast’s continued interest in pursuing the Merger on the other - the request is challenging and arguably impractical, as it would require parties who are now in an adversarial relationship to work together and move forward with the Merger,” the court writes.

Later, the court adds in the 11-page order, “The expectation that the parties would work cooperatively towards the consummation of the Merger … seems unrealistic” while litigation is pending.

The merger, announced about a year ago, faltered for several reasons.

In court filings last fall, San Diego County Credit Union had said it discovered what it called an alleged "worrisome lack of controls and outright non-compliance" by California Coast Credit Union and filed documents to end the merger. Cal Coast then accused SDCCU of intentionally derailing the merger without a valid cause. It asked the court to order the merger to go forward - a request which the judge denied - and for SDCCU to pay Cal Coast damages and legal costs.

A key part of their dispute centered on whether some of Cal Coast’s policies - involving deposit interest rates, some loan programs, Spanish translation and other matters - amounted to compliance issues, and whether SDCCU was informed and aware, or not, of certain possible issues as it entered the merger.

“SDCCU’s argument that there is an overall lack of compliance and lack of knowledge of the alleged compliance problems by Cal Coast, which is the primary material breach here, is persuasive,” Caietti wrote.

Cal Coast had countered that SDCCU went in with eyes wide open and left the deal in a rush, breaching its contract to merge, without taking an opportunity to work things out.

Were the concerns valid or a pretext for backing out?

The court decided those concerns mattered - and was skeptical that Cal Coast would remedy the alleged problems, writing, “Cal Coast’s assertion that the issues brought by SDCCU would resolve at the time of the merger is not compelling.”

The court explained why it found that SDCCU would face greater harm if the injunction were granted, than Cal Coast would face if it were not, writing that if the merger went ahead through a court order, SDCCU would be exposed to certain liabilities, lose autonomy and have to spend a lot of money on new hires, which would impact its ability “to operate and govern itself.” The harm to Cal Coast includes losing a “unique merger opportunity” and taking a hit to its reputation, the court said, but those could be remedied through money.

The judge also noted that the merger had not cleared a key hurdle - necessary approval by the National Credit Union Administration - and that the injunction would be “futile,” considering that they do not have regulatory approval to merge.

The credit union agency wrote in January that, while not denying the merger, it was holding off on approving it. “Due to the relative asset size of the credit unions involved, and areas of concern identified during the review, I am deferring my decision to approve or deny your merger request at this time,” the agency wrote.

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This story was originally published May 1, 2026 at 4:04 PM.